EX-99.1 2 d793264dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

Nine Energy Service Announces First Quarter 2024 Results

 

   

Revenue, net loss and adjusted EBITDAA of $142.1 million, $(8.1) million and $15.0 million, respectively, for the first quarter of 2024

 

   

Despite flat US rig count, increased gross profit in Q1 versus Q4

 

   

Surpassed 60,000 StingerTM Dissolvable Plug units sold

HOUSTON – Nine Energy Service, Inc. (“Nine” or the “Company”) (NYSE: NINE) reported first quarter 2024 revenues of $142.1 million, net loss of $(8.1) million, or $(0.24) per diluted share and $(0.24) per basic share, and adjusted EBITDA of $15.0 million. The Company had provided original first quarter 2024 revenue guidance between $135.0 and $145.0 million, with actual results coming within the provided range.

“The US land market was relatively stable in Q1, with the average US rig count remaining flat quarter over quarter. This was reflected in our revenue, which also remained relatively flat versus Q4 and was within the upper range of our original revenue guidance,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service.

“Despite a flat rig count, we increased our gross profit quarter over quarter due mostly to reduced whitespace, specifically within coil tubing where revenue increased by approximately 11% quarter over quarter. Completion tool revenue was relatively flat this quarter, despite a decrease in international sales. Additionally, we reached a major milestone in Q1, surpassing 60,000 Stinger Dissolvable Plug units sold since we introduced the technology in Q1 2020.”

“Although oil prices have been supportive, we saw a further decline in natural gas prices to below $2.00 starting in February and continuing into Q2. We do expect incremental activity slowdowns in the natural-gas levered basins, specifically the Northeast and Haynesville. Additionally, our cementing business will see full quarter realizations of pricing pressure in Q2. Because of this, we expect Q2 revenue to be down compared with Q1.”

“Despite this pause in activity in natural-gas levered basins, we remain positive on the medium and long-term outlook for the natural gas markets, and maintaining our footprint will be imperative to ensure we are able to capitalize when gas prices recover.”

“Our business is nimble, and we have shown our ability to capitalize quickly when market shifts. I believe our service and commodity diversity is critical, and we remain focused on diversifying more of our revenue streams to completion tools and the international markets. Our strategy of providing an asset-light business with forward-leaning technology and excellent service is unchanged and unique within oilfield services.”


Operating Results

During the first quarter of 2024, the Company reported revenues of $142.1 million, gross profit of $17.1 million and adjusted gross profitB of $26.1 million. During the first quarter, the Company generated ROIC of (10.9)% and adjusted ROICC of 6.0%.

During the first quarter of 2024, the Company reported general and administrative (“G&A”) expense of $12.3 million. Depreciation and amortization expense (“D&A”) in the first quarter of 2024 was $9.5 million.

The Company’s tax provision was approximately $0.2 million for the quarter. The provision for 2024 is the result of the Company’s tax position in state and non-U.S. tax jurisdictions.

Liquidity and Capital Expenditures

During the first quarter of 2024, the Company reported net cash used in operating activities of $(8.8) million. Capital expenditures totaled $5.6 million during the first quarter of 2024.

As of March 31, 2024, Nine’s cash and cash equivalents were $10.2 million, and the Company had $27.3 million of availability under the revolving credit facility, resulting in a total liquidity position of $37.5 million as of March 31, 2024. On March 31, 2024, the Company had $52.0 million of borrowings under the revolving credit facility.

As per the terms of the indenture governing Nine’s senior secured notes, the Company is required to periodically offer to repurchase such notes with a portion of any Excess Cash Flow. Nine did not generate any Excess Cash Flow, as defined in the indenture, in the most recently ended two fiscal quarters (the six-month period ended March 31, 2024). As a result, no Excess Cash Flow offer will be made to noteholders this month.

On November 6, 2023, the Company entered into an Equity Distribution Agreement. During the quarter ended March 31, 2024, no sales were made under the Equity Distribution Agreement.

ABCSee end of press release for definitions of these non-GAAP measures. These measures are intended to provide additional information only and should not be considered as alternatives to, or more meaningful than, net income (loss), gross profit or any other measure determined in accordance with GAAP. Certain items excluded from these measures are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets. Our computation of these measures may not be comparable to other similarly titled measures of other companies.

Conference Call Information

The call is scheduled for Tuesday, May 7, 2024, at 9:00 am Central Time. Participants may join the live conference call by dialing U.S. (Toll Free): (877) 524-8416 or International: (412) 902-1028 and asking for the “Nine Energy Service Earnings Call”. Participants are encouraged to dial into the conference call ten to fifteen minutes before the scheduled start time to avoid any delays entering the earnings call.


For those who cannot listen to the live call, a telephonic replay of the call will be available through May 21, 2024 and may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or International: (201) 612-7415 and entering the passcode of 13739259.

About Nine Energy Service

Nine Energy Service is an oilfield services company that offers completion solutions within North America and abroad. The Company brings years of experience with a deep commitment to serving clients with smarter, customized solutions and world-class resources that drive efficiencies. Serving the global oil and gas industry, Nine continues to differentiate itself through superior service quality, wellsite execution and cutting-edge technology. Nine is headquartered in Houston, Texas with operating facilities in the Permian, Eagle Ford, Haynesville, SCOOP/STACK, Niobrara, Barnett, Bakken, Marcellus, Utica and Canada.

For more information on the Company, please visit Nine’s website at nineenergyservice.com.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. Forward-looking statements also include statements that refer to or are based on projections, uncertain events or assumptions. The forward-looking statements included herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, the level of capital spending and well completions by the onshore oil and natural gas industry, which may be affected by geopolitical and economic developments in the U.S. and globally, including conflicts, instability, acts of war or terrorism in oil producing countries or regions, particularly Russia, the Middle East, South America and Africa, as well as actions by members of the Organization of the Petroleum Exporting Countries and other oil exporting nations; general economic conditions and inflation, particularly, cost inflation with labor or materials; equipment and supply chain constraints; the Company’s ability to attract and retain key employees, technical personnel and other skilled and qualified workers; the Company’s ability to maintain existing prices or implement price increases on our products and services; pricing pressures, reduced sales, or reduced market share as a result of intense competition in the markets for the Company’s dissolvable plug products; conditions inherent in the oilfield services industry, such as equipment defects, liabilities arising from accidents or damage involving our fleet of trucks or other equipment, explosions and uncontrollable flows of gas or well fluids, and loss of well control; the Company’s ability to implement and commercialize new technologies, services and tools; the Company’s ability to grow its completion tool business domestically and internationally; the adequacy of the Company’s capital resources and liquidity, including the ability to meet its debt obligations; the Company’s ability to manage capital expenditures; the Company’s ability to accurately predict customer demand, including that of its international customers; the loss of, or interruption or delay in operations by, one or more significant customers, including certain of the Company’s customers outside of the United States; the loss of or interruption in operations of one or more key suppliers; the incurrence of significant costs and liabilities resulting from litigation; cybersecurity risks; changes in laws or regulations regarding issues of health, safety and protection of the environment; and other factors described in the “Risk Factors” and “Business” sections of the Company’s most recently filed Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.


Nine Energy Service Investor Contact:

Heather Schmidt

Vice President, Strategic Development, Investor Relations and Marketing

(281) 730-5113

investors@nineenergyservice.com


NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

 

     Three Months Ended  
     March 31,
2024
    December 31,
2023
 

Revenues

   $ 142,120     $ 144,073  

Cost and expenses

    

Cost of revenues (exclusive of depreciation and amortization shown separately below)

     116,006       118,514  

General and administrative expenses

     12,265       12,810  

Depreciation

     6,734       7,003  

Amortization of intangibles

     2,796       2,829  

(Gain) loss on revaluation of contingent liability

     (74     25  

(Gain) loss on sale of property and equipment

     (26     699  
  

 

 

   

 

 

 

Income from operations

     4,419       2,193  

Interest expense

     12,792       12,813  

Interest income

     (310     (324

Other income

     (162     (162
  

 

 

   

 

 

 

Loss before income taxes

     (7,901     (10,134

Provision for income taxes

     154       171  
  

 

 

   

 

 

 

Net loss

   $ (8,055   $ (10,305

Loss per share

    

Basic

   $ (0.24   $ (0.30

Diluted

   $ (0.24   $ (0.30

Weighted average shares outstanding

    

Basic

     33,850,317       33,850,317  

Diluted

     33,850,317       33,850,317  

Other comprehensive income (loss), net of tax

    

Foreign currency translation adjustments, net of tax of $0 and $0

   $ (210   $ 213  
  

 

 

   

 

 

 

Total other comprehensive income (loss), net of tax

     (210     213  
  

 

 

   

 

 

 

Total comprehensive loss

   $ (8,265   $ (10,092
  

 

 

   

 

 

 


NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

 

     March 31, 2024     December 31, 2023  

Assets

    

Current assets

    

Cash and cash equivalents

   $ 10,237     $ 30,840  

Accounts receivable, net

     90,968       88,449  

Income taxes receivable

     344       490  

Inventories, net

     56,340       54,486  

Prepaid expenses and other current assets

     9,798       9,368  
  

 

 

   

 

 

 

Total current assets

     167,687       183,633  

Property and equipment, net

     81,232       82,366  

Operating lease right of use assets, net

     40,600       42,056  

Finance lease right of use assets, net

     31       51  

Intangible assets, net

     87,633       90,429  

Other long-term assets

     3,227       3,449  
  

 

 

   

 

 

 

Total assets

   $ 380,410     $ 401,984  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity (Deficit)

    

Current liabilities

    

Accounts payable

   $ 38,828     $ 33,379  

Accrued expenses

     22,804       36,171  

Current portion of long-term debt

     1,805       2,859  

Current portion of operating lease obligations

     10,396       10,314  

Current portion of finance lease obligations

     21       31  
  

 

 

   

 

 

 

Total current liabilities

     73,854       82,754  

Long-term liabilities

    

Long-term debt

     317,100       320,520  

Long-term operating lease obligations

     30,903       32,594  

Other long-term liabilities

     1,867       1,746  
  

 

 

   

 

 

 

Total liabilities

     423,724       437,614  
  

 

 

   

 

 

 

Stockholders’ equity (deficit)

    

Common stock (120,000,000 shares authorized at $.01 par value; 35,324,861 shares issued and outstanding at both March 31, 2024 and December 31, 2023)

     353       353  

Additional paid-in capital

     795,687       795,106  

Accumulated other comprehensive loss

     (5,069     (4,859

Accumulated deficit

     (834,285     (826,230
  

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     (43,314     (35,630
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity (deficit)

   $ 380,410     $ 401,984  
  

 

 

   

 

 

 


NINE ENERGY SERVICE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

     Three Months Ended  
     March 31, 2024     December 31, 2023  

Cash flows from operating activities

    

Net loss

   $ (8,055   $ (10,305

Adjustments to reconcile net loss to net cash provided (used in) by operating activities

    

Depreciation

     6,734       7,003  

Amortization of intangibles

     2,796       2,829  

Amortization of deferred financing costs

     1,795       1,728  

Amortization of operating leases

     3,294       3,454  

Provision for (recovery of) doubtful accounts

     (1      

Provision for inventory obsolescence

     220       355  

Stock-based compensation expense

     581       578  

(Gain) loss on sale of property and equipment

     (26     699  

(Gain) loss on revaluation of contingent liability

     (74     25  

Changes in operating assets and liabilities, net of effects from acquisitions

    

Accounts receivable, net

     (2,533     (3,352

Inventories, net

     (2,229     3,941  

Prepaid expenses and other current assets

     (430     (3,650

Accounts payable and accrued expenses

     (7,796     24,102  

Income taxes receivable/payable

     148       405  

Operating lease obligations

     (3,251     (3,410

Other assets and liabilities

     (10     (78
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (8,837     24,324  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Proceeds from sales of property and equipment

     28       76  

Purchases of property and equipment

     (5,488     (8,518
  

 

 

   

 

 

 

Net cash used in investing activities

     (5,460     (8,442
  

 

 

   

 

 

 

Cash flows from financing activities

    

Payments on ABL credit facility

     (5,000      

Proceeds from short-term debt

           4,733  

Payments of short-term debt

     (1,054     (1,874

Payments on finance leases

     (10     (20

Payments of contingent liability

     (159     (136

Vesting of restricted stock and stock units

            
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (6,223     2,703  
  

 

 

   

 

 

 

Impact of foreign currency exchange on cash

     (83     96  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (20,603     18,681  

Cash and cash equivalents

    

Beginning of period

     30,840       12,159  
  

 

 

   

 

 

 

End of period

   $ 10,237     $ 30,840  
  

 

 

   

 

 

 


NINE ENERGY SERVICE, INC.

RECONCILIATION OF ADJUSTED EBITDA

(In Thousands)

(Unaudited)

 

     Three Months Ended  
     March 31, 2024     December 31, 2023  

Net loss

   $ (8,055   $ (10,305

Interest expense

     12,792       12,813  

Interest income

     (310     (324

Depreciation

     6,734       7,003  

Amortization of intangibles

     2,796       2,829  

Provision for income taxes

     154       171  
  

 

 

   

 

 

 

EBITDA

   $ 14,111     $ 12,187  
  

 

 

   

 

 

 

(Gain) loss on revaluation of contingent liability (1)

     (74     25  

Restructuring charges

     27       823  

Stock-based compensation expense

     581       578  

Cash award expense

     415       320  

(Gain) loss on sale of property and equipment

     (26     699  

Legal fees and settlements (2)

           16  
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 15,034     $ 14,648  
  

 

 

   

 

 

 

 

(1)

Amounts relate to the revaluation of contingent liability associated with a 2018 acquisition.

(2)

Amounts represent fees and legal settlements associated with legal proceedings brought pursuant to the Fair Labor Standards Act and/or similar state laws.


NINE ENERGY SERVICE, INC.

RECONCILIATION AND CALCULATION OF ADJUSTED ROIC

(In Thousands)

(Unaudited)

 

     Three Months Ended  
     March 31, 2024     December 31, 2023  

Net loss

   $ (8,055   $ (10,305

Add back:

    

Interest expense

     12,792       12,813  

Interest income

     (310     (324

Restructuring charges

     27       823  
  

 

 

   

 

 

 

Adjusted after-tax net operating income (loss) (1)

   $ 4,454     $ 3,007  

Total capital as of prior period-end:

    

Total stockholders’ deficit

   $ (35,630   $ (26,116

Total debt

     359,859       357,000  

Less: cash and cash equivalents

     (30,840     (12,159
  

 

 

   

 

 

 

Total capital as of prior period-end:

   $ 293,389     $ 318,725  
  

 

 

   

 

 

 

Total capital as of period-end:

    

Total stockholders’ deficit

   $ (43,314   $ (35,630

Total debt

     353,805       359,859  

Less: cash and cash equivalents

     (10,237     (30,840
  

 

 

   

 

 

 

Total capital as of period-end:

   $ 300,254     $ 293,389  
  

 

 

   

 

 

 

Average total capital

   $ 296,822     $ 306,057  
  

 

 

   

 

 

 

ROIC

     -10.9     -13.5

Adjusted ROIC (1)

     6.0     3.9

 

(1)

Previously, in our SEC filings, press releases and other investor materials issued prior to December 31, 2023, we referred to (a) adjusted ROIC as ROIC and (b) adjusted after-tax net operating profit (loss) as after-tax net operating profit (loss). We have made no changes to the manner in which these measures are calculated and have only revised the titles of these measures to more clearly identify them as non-GAAP measures.


NINE ENERGY SERVICE, INC.

RECONCILIATION OF ADJUSTED GROSS PROFIT (LOSS)

(In Thousands)

(Unaudited)

 

     Three Months Ended  
     March 31, 2024      December 31, 2023  

Calculation of gross profit:

     

Revenues

   $ 142,120      $ 144,073  

Cost of revenues (exclusive of depreciation and amortization shown separately below)

     116,006        118,514  

Depreciation (related to cost of revenues)

     6,263        6,513  

Amortization of intangibles

     2,796        2,829  
  

 

 

    

 

 

 

Gross profit

   $ 17,055      $ 16,217  
  

 

 

    

 

 

 

Adjusted gross profit reconciliation:

     

Gross profit

   $ 17,055      $ 16,217  

Depreciation (related to cost of revenues)

     6,263        6,513  

Amortization of intangibles

     2,796        2,829  
  

 

 

    

 

 

 

Adjusted gross profit

   $ 26,114      $ 25,559  
  

 

 

    

 

 

 


NINE ENERGY SERVICE, INC.

EXCESS CASH FLOW CALCULATION

(In Thousands)

(Unaudited)

 

     March 31, 2024  

Net cash provided by operating activities (1)

   $ 15,487  

Repurchases of common stock in connection with stock-based employee compensation

      

Capital expenditures used or useful in a Permitted Business:

  

Purchases of property and equipment

     (14,006

Proceeds from sales of property and equipment

     104  

Repayments of ABL Obligations

     1,655  

Charges in respect of finance lease obligations

     (30

Debt issuance costs

      

Payments on short-term debt

     (2,928

Impact of foreign exchange rate on cash

     13  

Contingent liability payments

     (295
  

 

 

 

Excess Cash Flow

   $  

Excess Cash Flow %

     75

Excess Cash Flow Amount

   $  
  

 

 

 

 

(1)

Amount consists of the Company’s consolidated operating cash flow, determined in accordance with GAAP, for the fiscal quarter ended December 31, 2023 ($24.3 million of net cash provided by operating activities) and for the fiscal quarter ended March 31, 2024 ($8.8 million of net cash used in operating activities).

See the definition of Excess Cash Flow included in the Indenture filed as Exhibit 4.2 to the Current Report on Form 8-K filed February 1, 2023.


AAdjusted EBITDA is defined as EBITDA (which is net income (loss) before interest, taxes, and depreciation and amortization) further adjusted for (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) fees and expenses relating to our units offering and other refinancing activities, (iv) loss or gain on revaluation of contingent liabilities, (v) loss or gain on the extinguishment of debt, (vi) loss or gain on the sale of subsidiaries, (vii) restructuring charges, (viii) stock-based compensation and cash award expense, (ix) loss or gain on sale of property and equipment, and (x) other expenses or charges to exclude certain items which we believe are not reflective of ongoing performance of our business, such as legal expenses and settlement costs related to litigation outside the ordinary course of business. Management believes adjusted EBITDA provides useful information to us and our investors regarding our financial condition and results of operations because it allows us and them to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure and helps identify underlying trends in our operations that could otherwise be distorted by the effect of impairments, acquisitions and dispositions and costs that are not reflective of the ongoing performance of our business.

BAdjusted gross profit (loss) is defined as revenues less cost of revenues excluding depreciation and amortization. This measure differs from the GAAP definition of gross profit (loss) because we do not include the impact of depreciation and amortization, which represent non-cash expenses. Our management believes adjusted gross profit (loss) provides useful information to us and our investors regarding our financial condition and results of operation and helps management evaluate our operating performance by eliminating the impact of depreciation and amortization, which we do not consider indicative of our core operating performance.

CAdjusted return on invested capital (“adjusted ROIC”) is defined as adjusted after-tax net operating profit (loss), divided by average total capital. We define adjusted after-tax net operating profit (loss), which is a non-GAAP measure, as net income (loss) plus (i) goodwill, intangible asset, and/or property and equipment impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) fees and expenses relating to our units offering and other refinancing activities, (iv) interest expense (income), (v) restructuring charges, (vi) loss (gain) on the sale of subsidiaries, (vii) loss (gain) on extinguishment of debt, and (viii) the provision (benefit) for deferred income taxes. We define total capital as book value of equity (deficit) plus the book value of debt less balance sheet cash and cash equivalents. We compute and use the average of the current and prior period-end total capital in determining adjusted ROIC. Management believes adjusted ROIC provides useful information to us and our investors regarding our financial condition and results of operations because it quantifies how well we generate operating income relative to the capital we have invested in our business and illustrates the profitability of a business or project taking into account the capital invested, and management uses adjusted ROIC to assist them in capital resource allocation decisions and in evaluating business performance. Previously, in our SEC filings, press releases and other investor materials issued prior to December 31, 2023, we referred to (a) adjusted ROIC as ROIC and (b) adjusted after-tax net operating profit (loss) as after-tax net operating profit (loss). We have made no changes to the manner in which these measures are calculated and have only revised the titles of these measures to more clearly identify them as non-GAAP measures.